Along with purchasing a home from an existing homeowner, many people prefer purchasing a home from an owner that is in the process of being or has already been foreclosed on. Homeowners who get behind on their mortgages, unable to refinance or modify their loans for a lower payment, lose their homes. These homes are sold at a reduced value, providing a bargain for buyers. Let’s go into detail to explain the difference between a Short Sale and a Foreclosure, commonly known as a Bank Owned or REO (Real Estate Owned).
Short Sale
When an existing homeowner runs into trouble staying current on the payments with their mortgage, the lender may allow the home to be sold in a short sale. In a short sale situation, the bank agrees to let the home be sold for less than what the current owner owes on the property. The sale will be “short” of the owed amount. The sale amount has to be approved by the lender, a process that can take from three months up to a year or sometimes more. Do not mistake the amount of time for being short. This is generally a longer process.
Bank Owned Houses
A bank becomes the owner of a property once a homeowner defaults on the loan and the right of redemption period has expired. The house is foreclosed. This right of redemption varies from state to state. In Illinois, foreclosure takes a minimum of seven months. In a judicial foreclosure sale, the bank becomes the owner, allowing the institution to recoup any losses suffered from the loan default.
Buying a Short Sale
Purchasing a short sale home requires patience. During this process, the bank is attempting to get the highest amount for the house. The offer must be approved by the asset manager for the bank and lien holder and may take up to a year or more. During this time, a prospective buyer must watch spending habits and continue to keep their credit in good standing. If they do not, they risk losing the house, along with putting the sellers at risk to going into foreclosure.
Purchasing a Foreclosure
The purchase of a bank-owned property is similar to dealing with a homeowner. At this stage, the bank is simply selling the property to remove it from its books. The houses are usually priced lower than market value and there is a single asset manager assigned to oversee the sale. This asset manager is authorized to accept, counter or reject offers.
Which are Better? Foreclosures or Short Sales?
If a prospective home buyer is looking for a bargain but does not have an extensive period of time to wait for bank approval, then purchasing a bank-owned property is better. Bank-owned properties, or foreclosures) are sold ”as is,” meaning the bank is not responsible for any repairs, and any damage in the home will be the responsibility of the new owner. There are certain situation where a bank may allow for absolutely necessary repairs to be made. For those who wish to purchase a home where the current homeowner is still involved and able to relay any information on the home, than purchasing a short sale is the better option, although a longer one. For those of you that are willing to do some of your own repairs or obtain financing to have the repairs done through an FHA 203k or 203b loan, the foreclosure or bank owned is the route to choose.
Most Recent Bank Owned Seattle – Federal Way – Tacoma – Dash Point – Browns Point Foreclosures
Newest Short Sales in Tacoma – Seattle – Federal Way – Dash Point & Browns Point – Short Sales






